Despite a lack of fresh support for the Pound this morning, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate jumped to its best levels since late-December. Bets on the Pound’s outlook are becoming more bullish, so the Pound’s movement could begin to improve soon.
The New Zealand Dollar is unappealing today, as investors continue to sell currencies correlated to risk and trade sentiment. This is due to worsening global coronavirus infections and US political uncertainty.
Last Week: Sterling Surges in Recovery amid Market Risk-Aversion
A combination of a more hawkish Bank of England (BoE) outlook and market risk-aversion saw the Pound to New Zealand Dollar exchange rate surging last week.
Investors withdrew bets of negative interest rates from the BoE, after BoE Governor Andrew Bailey signalled hesitance to utilise negative rates.
As Sterling rebounded on this change in expectations, the New Zealand Dollar tumbled. Investors sold risk and trade-correlated currencies in favour of safe havens as global coronavirus infection rates worsened.
Three Things to Watch For This Week:
- US Political Developments
The world will be watching the US on Wednesday, when President-elect Joe Biden is inaugurated as President. Any civil unrest or other political shocks could influence market sentiment for the rest of the week.
2. New Zealand Inflation
New Zealand’s Q4 2020 inflation rate will be published during Friday’s Asian session. If the data impresses investors, it could help the New Zealand Dollar hold its ground.
3. UK Data
Key UK retail stats and PMI projections will be published on Friday. If they show that Britain’s economy has been resilient amid the coronavirus pandemic, the Pound is more likely to mount a recovery.
GBP/NZD Outlook
Analysts predict the Pound could see stronger performance soon, so persisting risk-aversion could mean more Pound to New Zealand Dollar exchange rate gains.